If a market maker is required to always have at least one order on a certain side of the order book (buy or sell), if there's no one else in the market and just market makers left on the book, will they just automatically trade shares then? Or are the "orders" placed in the book by market makers some special kind of order that doesn't actually get executed?
Owen, designated market makers in general are required to send in a two sided market (a bid and and offer) within a certain width for a certain percentage of the time. There's no obligation to cross the market and actually trade.
Also, many people who self-identify as market-markers are not really designated by any exchange and have no obligation even to make a two sided market. In that case the term "market-maker" refers just to the style of passive and continuous trading.